A savings account is the most basic account offered by banks today. It is an account that offers interest on the account, but it also has limited access to the funds. The only ways you can access the funds are through a withdrawal at the bank or at the ATM. Some banks may allow one or two transfers a month from the account, but these are often limited.
The interest rate on a normal savings account is fairly low. For this reason a savings account is good for a person who is just beginning to save money, and cannot meet the minimum balance requirements on a money market account. Savings accounts are insured by the FDIC for up to $100,000.
If you are just opening your savings account, it is important to understand the minimum balance requirements. You should also check to see if you have a limited number of withdrawals each month. Banks may charge a fee with each withdrawal after the first three. You can set up automatic transfers and deposits into your account, which will help you to save money automatically.
You may consider setting up a savings account with an online bank. These accounts offer a higher interest rate. The banks can take up to three days to transfer the money to your local checking account. This means that you should only transfer money over that you do not usually need. This can be used to your advantage, if you struggle with impulse spending, because it forces you to spend time thinking about unplanned major purchases.
A savings account is a good place for your emergency fund. This applies specifically to at least $1000.00 dollars. Since this is the amount that most emergencies will cost if you own a home you may need to increase that amount up to $3000.00. After that you may consider putting the remainder of your emergency fund into other savings tools offered through your bank.